Charles Oliver joined Sprott Asset Management LP in January 2008. He focuses on gold and silver investments as a portfolio manager for the Sprott Gold & Precious Minerals Fund and the Silver Equities Class.

When I spoke to Mr. Oliver last summer, he said the weakness in the gold price in the face of unprecedented money printing from the Fed had taken him by surprise.

Have we passed a decisive point since then? Is gold heading up?

“I believed throughout 2013, with the price of gold coming down, the fundamentals were only getting better,” he answered. “During that time, the Chinese bought like mad and the Fed printed another trillion dollars through QE. Nonetheless, heavy selling took the gold price down.

“Today, the difference is that the sellers are exhausted, and physical demand is catching up. One of the numbers we are looking at is the quantity of registered inventories on the COMEX for gold. That’s the amount of physical gold that is available when someone asks for physical delivery instead of a cash settlement.”

In the following chart from Bloomberg, we can see inventories of physical gold on the COMEX (in ounces) have declined dramatically, falling by around 30% in the past year:

In September 2011 the Gold Bugs index, the HUI stood at 630 as gold prices peaked, since then both have trended lower with the HUI losing about 65% of its value. The bottom has been called a number of times and after such a dramatic decline its difficult not to think that we are there now. However, as we all know the timing of any investment is crucial to its success and that is exactly what we are trying to do here, trying to pick advantageous entry and exit points. If you would like to know which stocks we are buying and selling please join us at ‘Stock Trader’our premium investment service.

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